1.) You know that the price of Crane, Inc., stock will be $31 exactly one year from today. Today the price of the stock is $30. Determine what must happen to the price of Crane, Inc., today in order for an investor to generate a 24 percent return over the next year. Assume that Crane does not pay dividends.

The price should _____ to $_____

2.) You must choose between investing in Stock A or Stock B. You have already used CAPM to calculate the rate of return you should expect to receive for each stock given each ones systematic risk and decided that the expected return for both exceeds that predicted by CAPM by the same amount. In other words, both are equally attractive investments for a diversified investor. However, since you are still in school and do not have a lot of money, your investment portfolio is not diversified. You have decided to invest in the stock that has the highest expected return per unit of total risk.

If the expected return and standard deviation of returns for Stock A are 11 percent and 25 percent, respectively, and the expected return and standard deviation of returns for Stock B are 18 percent and 30 percent, respectively, which should you choose? Assume that the risk-free rate is 6 percent. (Round answers to 3 decimal places, e.g. 52.750.)

		Stock A		Stock B
Highest expected return per unit of risk

3.) You are considering investing in a mutual fund. The fund is expected to earn a return of 16 percent in the next year. If its annual return is normally distributed with a standard deviation of 6.60 percent, what return can you expect the fund to beat 95 percent of the time? (Round answer to 2 decimal places, e.g. 52.75%.)